Xbox One: Microsoft "biting off more than it can chew"

We talk to analysts about the new Xbox unveiling; David Cole fears Microsoft is "screwing up" its advantage but Pachter likes what he sees

Microsoft has finally lifted the curtain on its next-gen console, the Xbox One. The unveiling seems to be getting mixed reactions so far, and that appears to be true of analysts as well. GamesIndustry International caught up with several leading games analysts immediately following the conclusion of the live-streamed event. With Sony first to announce its next-gen system back in February, and Nintendo continuing to struggle with Wii U sales, how would Microsoft position the new Xbox? From the looks of it, Microsoft is approaching the console market very differently than Sony and that may endanger its hardcore support.

"Just the name Xbox One says a lot. Microsoft desperately wants to have their system be the centerpiece of living room entertainment. Sony also wants that but they seem to be going in a much more game centric direction. In terms of which strategy will win we would put our bets on targeting gamers," said DFC Intelligence's David Cole. "The concern with Microsoft is that they are going after a need that isn't really there. Yes, it is convenient to have your game system play video but there are all kinds of devices that do that. If a consumer is putting that kind of money down they want the system that plays the best games."

"Overall there has to be some concern that Microsoft is biting off more than they can chew," Cole continued. "With no backward compatibility the Xbox One is starting from scratch. Microsoft had a huge success with the Kinect and that could be their downfall. The Xbox brand resonated primarily with a core gaming group but they shouldn't assume that means they will automatically stay around. Sony learned that lesson the hard way in the transition from the PlayStation 2 to the PlayStation 3."

"In the US Microsoft has a major advantage but they could easily screw that up very quickly...This will be a marketing game and right now Sony seems to be winning"

David Cole

Monthly data from The NPD Group shows that Microsoft's Xbox brand has been a huge success in North America, as the Xbox 360 has been outselling competing consoles every month. If Microsoft isn't careful, however, it could lose this momentum that it's worked so hard to build up.

"In the US Microsoft has a major advantage but they could easily screw that up very quickly. We only need to look at Nintendo's disastrous recent product launches for a lesson. This will be a marketing game and right now Sony seems to be winning," Cole warned. "Pricing is likely to be a key issue and that has not been addressed at all. Hardware price, Xbox Live as a mandatory subscription, bundles with entertainment providers and other cost issues will be the real key. We expect a lot of great exclusive content from both Sony and Microsoft but how they package and market it will be what matters at the end of the day. It is still too early to make any major calls."

Wedbush Securities' Michael Pachter and EEDAR's Jesse Divnich were much more optimistic about what they saw from Microsoft today.

"I'm actually pretty happy with what I saw. I don't think this is going to be a poor seller; I think the odds of this thing selling poorly are pretty low unless it's a thousand bucks," Pachter said, adding that he envisions Xbox One retailing for about $400. He noted, however, subsidizing the hardware with cable providers is a likely scenario still, given the TV focus of the system.

While Cole believes that the lack of a core gaming focus could hurt Microsoft, Pachter sees it as a smart move to gain a larger market.

"It's very much an entertainment focused box. They only gave us a glimpse of games. 15 exclusives and 8 new IPs, that's pretty cool... But they kind of did exactly upside-down what Sony did. Sony was all games all the time and this was all entertainment, saying games would be at E3. The gaming press was really excited by the games focus by Sony, but I think this has more mass appeal and I think E3 is a games focused show so I think maybe that strategy is smarter," Pachter noted.

"The gaming press was really excited by the games focus by Sony, but I think this has more mass appeal...I think the mainstream press will be excited by this"

Michael Pachter

"I think the mainstream press will be excited by this. It is a nice interface. That's the thing I've been talking about for a while - if it gets rid of your cable box, then it's interesting. If the only thing you have in your living room is an Xbox, that's pretty powerful. Technologically it's doable right now," he added.

While Sony talked up how the PS4 will be the most open console ever, paraded Jonathan Blow out on stage at its unveiling and has been courting indies ever since, Microsoft didn't mention independent developers even once. The company's standing among indies in recent years has already taken a hit, and this probably didn't help any. Pachter, however, isn't concerned by the lack of an indie focus. "It's great for the development community but really not that many people buy them, so I don't know... I think Sony wants to win on game content and maybe they will but we don't really know what Microsoft has got yet," he commented.

For his part, even though we didn't see much for the core gamer today, EEDAR's Divnich still believes Microsoft will have plenty in store for its loyal audience, and the mention of 15 exclusives coming from Microsoft Game Studios is just the start.

"Our communication with Microsoft has indicated that they plan on investing more resources into first-party content than they've ever had before. This is important. It's clear that Microsoft is trying to deliver the total entertainment experience to consumers across all demographics and all entertainment verticals, but it's important that Microsoft not forget the core gaming consumer," he said. "Microsoft's dedication to continue to support those core gamers with exclusive new intellectual properties is a reassurance to all us gamers that the company comprehends the important role we play in driving the Xbox One's success."

"The Xbox One is an evolutionary step in the entertainment consumption experience. Microsoft has been battling for control of the living room since the launch of the original Xbox in 2001 and has since proven they've seen eye-to-eye with how their audience consumes entertainment content. The Xbox One stands to provide the total living room experience for the entire family, while at the same time not alienating the core gaming consumer or the core gaming experience. It's an impressive leap forward and one that will resonate well with the North American audience," he continued.

Ultimately, Divnich does not see a loser in the next-gen console race. Both PS4 and Xbox One should be viable consoles that gain plenty of third-party support and the end result will be a boost for the games industry.

"With the Xbox One and the PlayStation 4 launching in similar timeframes, we believe this is a win-win for the industry and traditional console manufacturers. While competition often results in a winner and loser, we believe the near simultaneous launch will provide a benefit to the overall traditional home come market," he said. "The two marketing campaigns combined will act as an amplifier to why traditional home gaming is still relevant and an overall deeper immersive experience compared to other gaming technologies. While the market has witnessed some stumbling in the traditional space over the last 12 months, we believe confidence in traditional HD gaming will rise to pre-2010 hypes coming out of the 2013 holiday season."

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Latest comments (20)

Nick McCrea Gentleman, Pocket Starship5 years ago
The respective share prices of MSFT and particularly SNE moved in interesting ways today. Perhaps the market doesn't share Mr Pachter's analysis and thinks Sony is on firmer ground here. Obviously the fee on second hand sales plays horrendously with consumers; what interests me at this point is whether Sony suffers any consequences from publishers if it seeks to exploit the gathering core gamer rage by allowing unrestricted second hand trading.

Edited 1 times. Last edit by Nick McCrea on 21st May 2013 10:19pm

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It's an impressive leap forward and one that will resonate well with the North American audience," he continued.
Well, and this is the problem. From what I saw at unveiling this new Xbox is so US-centered that it gives an impression MS forgot that the rest of the world exists. How many of these features will we actually see in Europe? Who outside of USA cares about NFL? Will we see the same level of partnership with European football (soccer) leagues?
What about Kinect voice commands for non-English and non-FIGS regions? What about other content?

As a purely gaming machine Xbox One doesn't really have much to offer to customers outside of US and maybe UK. I don't see people spending money on a box with features half (or more) of which can't be used.
MS better start addressing those and other concerns fast.
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Justin Biddle Software Developer 5 years ago
Pachter likes it. The Xbox One is doomed!
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Show all comments (20)
Caleb Hale Journalist 5 years ago
Internally, the Xbox One and PlayStation 4 are much more similar than the Xbox 360 and PS3 from a games development standpoint. The cross-platform titles will be there, both companies seems to be ramping up first parties to produce exclusive games; both will have a robust interface and features for non-gaming entertainment.

They are virtually the same machine, but the real battle this time between Sony and Microsoft will be one of perception. Sony might convince everyone they are the "serious gamer" console, but Microsoft has a strong online community and they introduced Xbox One in a way that's going to get the general public talking.

Both consoles, I think will start strong, but it's going to be a marathon more than a sprint. The company that wins this next generation will be the one that keeps players engaged in the ecosystems they are creating.
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Greg Wilcox Creator, Destroy All Fanboys! 5 years ago
@Caleb: and therein lies the problem. the first time any of these ecosystems fails the consumer's expectations (and yes, the company's), it's going to be an out of box experience for plenty who bought in and wanted a flawless experience. Yes, both launches will be incredible, but any service muck-ups will see the internet blaze up like we've never seen if it's hack-related or something where a lot of people get stuck with big black bricks for more than the time it takes for a mandatory service update.

And yeah, i wonder about the Japanese One market, given Microsoft's issues with getting people to actually buy the system there in decent numbers. I'm sure Europe will be OK if their sports needs are met (ha ha?). Then again, I'm NOT a big US sports/sports game fan at all, so most of that presentation had me snoozing.

As for the "marathon"... it sure NEEDS to and SHOULD be, but you know the suits and analysts will be over-trumpeting high and low sales figures for each system how they like (and in some analyst cases, predicting doom if one isn't moving in the numbers they want to see). Hell, count sales all you want, I say - if people aren't happy with what they buy (or get stuck having to begrudgingly shell out for a replacement later), do those numbers ever get recorded somewhere? To me, that's always the more telling figure when all is said and done...
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Konstantin Hohl5 years ago
I dont see the great promis of the One multimedia-wise, so I have to diagree with the "next stop in the evolution talk". Yes, at the moment most online-video gets consumed on consoles in the U.S. But the current TV generation already has all those functions integrated. Soon, when todays TVs will have penetrated the user-market , all of One's multimedia features are threatened to be substituted.

And also: Isnt the required kinect with daily online connection not a risky move? I mean a camera that films living rooms and is connected to the internet at least once per day... Sounds like material for an outrage of data protectionists to me...

Edited 1 times. Last edit by Konstantin Hohl on 22nd May 2013 12:32am

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Greg Wilcox Creator, Destroy All Fanboys! 5 years ago
@Konstantin: Funny you mention that, as I overheard a conversation about an hour back between two parents debating the feature and bot were against the idea of "checking in" and a console that might need to always be hooked into a server for some reason. "It's not a damn phone, right?" and "I already have cable so I don't need this" were the two things that made me chuckle (well, it DOES use Skype now, eek)... Well, let's hope there aren't any really nefarious data protectionists planning anything nasty for the One's launch or in the future. I'm not into this new Xbox (yet) but I'd love to see it succeed and make me go eat another frozen crow pie one of these days...
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Rodney Smith Developer 5 years ago
xbox one: the advanced remoted control that only works in america
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Rick Lopez Illustrator, Graphic Designer 5 years ago
Im not sold on the Xbox one. Its not clear on what it wants to be, it wants to do everything, but I think If you just wanna watch TV or just play games, most of those new features are irrelivant. The other thing that put me off, is having a machine always online that has a camera pointing at me. Look I just want to play games, whats easier than popping the game in, switching the power up and pressing start? It made that look so much harder now. They say you can switch from one game to another seeminglessly? Really... what about that everytime I pop in a new game I have to install it. It also blocks used games, so what happens if someone wants to lend me a game or I lend a familiy member a game on another Xbox. Unless they are logged into my account they need to pay a fee. You know, this really really sucks. I suddenly miss my remote control. God forbid anybody getting a cold and losing there voice. Or falling off a bycicle and breaking an arm. I dont see how this is easier. Now I gotta flail my arms around to select something and talk to the air alone in my living room and feel awkward when there are people in my house. And I have a camera pointed at me always online when i do it.
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Eoin Moran Studying Bachelor of Engineering, University of Melbourne5 years ago
What I don't understand is how the xbox is going to be able to differentiate the user moving their arm to control the unit and moving their arm to grab a Budweiser.

...Or maybe I'm just stereotyping the user base, and they don't in fact move whilst watching tv
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Greg Wilcox Creator, Destroy All Fanboys! 5 years ago
Hey, elephant in the room time. What does this do for porn watchers out there? Not sure they even want to go near any game console with a good memory and a mandatory camera watching them. Although, I can see some folks liking that feature (Yuk...)...
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Rick Lopez Illustrator, Graphic Designer 5 years ago
@Greg Wilcox - You pulled the words right out of my mouth. I was gonna go a bit more subtle like saying... what happens if you wanna have sex with someone in the living room. Now you cant cause Xbox will always be watching you.... this really reminds me of the movie Anti-Trust. Who really knows what goes on behind that camera.

Oh and what happens if a person speaks slovanian or russian, they cant use the Xbox, i mean... how many languages does it understand????

Edited 1 times. Last edit by Rick Lopez on 22nd May 2013 4:18am

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Martin Parker Studying BSc (Hons) Computer Games Programming, University of Derby5 years ago
Just wait for Microsoft to announce:
Now we can detect and record events in your living room by detecting movement and upload everything you do to the cloud with "Xbox Moments".
And don't worry we automatically create a highlights reel and share it with all your, friends, family and work colleagues over the integrated Facebook app...
Only on Xbox.
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Rick Lopez Illustrator, Graphic Designer 5 years ago
Look Im just gonna get rid of everything that was said and Im just gonna talk about how I felt in both the SONY and MIcrosoft next generation reveal... With SONY I felt overjoyed they hit the right notes. With Microsoft I feel dissapointed and gutted. And Im trying to figure out why...
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Martin Parker Studying BSc (Hons) Computer Games Programming, University of Derby5 years ago
It just seems that MS is living on a completely different planet to us where the internet is perfect and we all love to watch TV and play Call of Duty and have everything all on one screen with one device... The reality is more that we live in a multi-screen life, I no longer want to just sit and watch live TV we also want to play on a tablet or read the news on a laptop as well as watch TV. Nintendo were nearly there with the Wii U but if you look at what Google thinks the future is for android is, thats what more like what I wanted to see from Microsoft. Why shouldn't I be able to watch live TV and chat on Skype from my Windows laptop while I'm playing Skyrim and have my friends see what I'm doing in game and have a unified service across all of my Microsoft products...
But that is why I was unimpressed... I can't tell you why you were unimpressed. What were your expectations?
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robert troughton Managing Director, Coconut Lizard5 years ago
I actually think the Xbox One could do really well - not just in USA but in Europe as well. I just wish that Microsoft had left this entire reveal until E3 and just shown everything together - what they showed yesterday along with all the games that they're showing at E3. First impressions count - and my Facebook feed is filled with people dissing Xbox and upping PS4 right now.

The TV aspect of Xbox One has been something I'd been hoping for for a while. By having the HDMI input from cable I can see what they're doing there, too - it means that, for a while, people will have at least two boxes under their TV... their satellite/cable box plus Xbox One. Sometime down the line, though, when all TV moves onto the internet, all available on-demand, there'll just be Xbox One. Microsoft would be there to deliver everyone's favourite TV shows and movies, possibly cutting out the cable/satellite providers and possibly even cutting out the channels (this has been something I've wondered about for years - who needs BBC One, Sky Atlantic, etc, if instead we just have direct access to thousands of TV shows?

What I thought was a little cringey about this presentation was the voice control. Personally I would much rather use Smart Glass to control things than voice. I have 3 kids - so if we're all in the living room and all want to watch different things..? "Xbox Watch Peppa Pig!", "Xbox Watch BBC News!"... and then the inevitable screaming, punching, scratching... "Xbox, Disable Voice Control".
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Klaus Preisinger Freelance Writing 5 years ago
Refresh my memory again why I would need an Xbox to display a TV signal, when I have a TV displaying the TV signal? Why is everyone saying you need just one box for all your TV? Currently I need NO box for all my TV, I just plug the decryption card into my TV and bang, TV. No box, one remote; for the TV.

Also, a console requiring an online connection at least once a day equipped with surveillance camera and microphone in a Microsoft powered online network. What could possibly go wrong?
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Gareth Eckley Commercial Analyst 5 years ago
Rarely have I seen such a bold move since Atari tried to sue Activision for developing third party games for the 2600.

I'm sure it will be equally successful.
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Rick Lopez Illustrator, Graphic Designer 5 years ago
I just wanna play games DAMMIT!!!!
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Greg Wilcox Creator, Destroy All Fanboys! 5 years ago
Hmmm. I decided to take a trip to Microsoft's Xbox forums and wow... it's brutal over there like someone dropped a hot dog into a barrel of hungry cats. Well, it's to be expected from such a large user base that just wants some straight answers but are still getting mixed and crossed signals. E3 needs to floor that crowd or it's going to be a wild ride until launch...
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